Bahraini authorities also heard a call from the U.N. human rights agency to move a jailed hunger striker to a civilian hospital. Opposition leaders have said the court's gesture was insufficient and street unrest would resume later on Tuesday.

Majority Shi'ite Muslims, whose unrest is seen by the Sunni ruling elite as a subversive bid to put U.S.-aligned Bahrain under the sway of Shi'ite Iran, complain of discrimination and marginalization in political and economic life.

The government says many Shi'ites hold state posts and help run the economy and that police and judicial reforms have begun. But there has been no progress on the main opposition demand for a parliament with full powers to legislate and form governments.

The cassations court, the highest judicial body in the Gulf Arab state, on Monday shifted the case of 21 men who were convicted in a military court to a civilian court and freed one, lesser-known prisoner. Seven of the 21 are abroad or in hiding.

But the court ruled the men would remain in jail, including Abdulhadi al-Khawaja, who was being fed intravenously in a military hospital after nearly three months of hunger strike.

"More than a year after they were arrested, the Bahraini authorities have produced no evidence that the jailed leaders were doing anything but exercising their basic human rights," New York-based Human Rights Watch said in a statement.

"The Court of Cassation made no reference, however, to the fact that the defendants had merely been exercising their basic human rights."

Government officials were unavailable for comment.

"We have urged the Bahraini authorities to take steps to ensure the release of Mr al-Khawaja and his transfer to a civilian hospital," U.N. human rights agency spokesman Rupert Colville told a news briefing in Geneva on Tuesday.

"There is no reason for him to be held incommunicado and he should be given immediate access to his family, to the Danish ambassador...and to a doctor and a lawyer of his own choosing."

UPHEAVAL

Bahrain, where the U.S. Fifth Fleet is based as a bulwark against Iran across the Gulf, remains in turmoil over a year after Shi'ite-led protests first erupted, inspired by uprisings against autocratic regimes in Egypt and Tunisia.

Opposition parties stage big rallies every week and clashes between riot police and youth protesters break out nightly in Shi'ite neighborhoods around the island country, whose government is dominated by the Sunni Muslim al-Khalifa family.

The unrest has cracked the stability of Bahrain and spurred Saudi calls for a union of oil-exporting Gulf Arab monarchies to help counter Iranian influence and neutralize protest movements.

The Manama government brands the opposition as Shi'ite Islamist extremists in the pocket of Shi'ite clergy-ruled Iran. The opposition denies this, saying such accusations are a pretext to cling to unfair privileges.

Britain's Foreign Office said the new trial should be completed quickly and expressed concern for Khawaja's health, calling for an "urgent and compassionate solution".

"We now urge the courts to move this forward urgently, with due process and transparency. We call for all other upheld convictions by the military courts to be reviewed without further delay," the Foreign Office said in a statement.

The government also intends to put on trial 20 medics on charges of incitement to overthrow the government and trying to occupy a hospital. Rights groups say the 20 have been victimized for treating protesters wounded by security forces last year.

Opposition leaders said the protest campaign would continue until all prisoners were released and political and human rights reforms enacted, and more demonstrations were on tap on Tuesday.

Independent parliamentarian Osama Mohanna called for the al Khalifa prime minister, who has been in power for 41 years, to resign last week. A gym he owns was shot at by unknown assailants a few days later, the interior ministry said.

Horr al-Sumaikh, the only opposition figure among the 21 to have been released by the appeals court, was given a hero's welcome in his village of Nuweidrat on Monday night.

"Today is a happy day because of the release of my brother, after over a year," Mohammed al-Sumaikh said as well-wishers met the freed man with flowers and applause.

(Additional reporting by Andrew Hammond in Dubai and Stephanie Nebehay in Geneva; Writing by Andrew Hammond; Editing by Mark Heinrich)